Argentine stocks and bonds consolidate their rally as country risk falls to its lowest level of the year.

Argentine stocks and bonds extended their positive trend this Friday, consolidating the recovery that began Thursday in international markets. The country risk index broke through 700 basis points for the first time in five months, news celebrated by President Javier Milei as an achievement of the government 's economic policy . At the same time, sovereign and private assets were boosted by increased global appetite following the announcement of a trade agreement between the United States and the United Kingdom.

Locally, the S&P Merval rose 1.6% to 2,094,488 points, while leading stocks such as Edenor (+4.3%), IRSA (+3.8%), and Metrogas (+2.8%) led the gains. On Wall Street, ADRs of Argentine companies advanced up to 4.5%, with Telecom and Central Puerto among the standouts.

The government celebrated the collapse of the country risk index, which fell 88 points (-11.5%) to 678 basis points, its lowest level since December 2023. For Milei's administration, this improvement is key to regaining access to international debt markets and meeting the goals agreed upon with the IMF.

Central Bank Director Federico Furiase emphasized that the decline in country risk is a sign of market confidence in the economic direction and fiscal strategy. The Executive Branch emphasizes that it is not intervening in the foreign exchange market, which reinforces the credibility of the floating rate scheme within the established bands.

However, the decline in reserves continues to cause concern. Since the peak on April 28, the Central Bank has lost nearly USD 1.3 billion and breached the USD 38 billion threshold. The government's priority remains avoiding pressure on the exchange rate and accelerating the disinflation process, even if active foreign currency purchases are postponed.

The official strategy contemplates other ways to accumulate reserves, such as capital inflows through the financial account or new debt issuances. This week, negotiations for a repo agreement with international banks for USD 2 billion were confirmed, and undeclared holders of dollars were authorized to participate in peso-denominated auctions, a tool aimed at promoting officially backed carry trade.

Dollar-denominated sovereign bonds under foreign law reacted with increases of up to 1.9%, especially Global Bonds maturing in 2046, while peso-denominated bonds also posted gains driven by the fall of the dollar. The carry trade strategy gained traction, with effective annual yields of 31% to 34% in medium and long-term bonds.

The MEP dollar closed at $1.143 after hitting a low of $1.130, narrowing the gap with the official exchange rate to 1%. The cash settlement (CCL) also fell to $1.157.44. Meanwhile, the blue dollar fell $5 and closed at $1.165, even below the official exchange rate.

The government's most immediate goal is to accumulate USD 4.4 billion in reserves by June 13, the date on which the first review of the new agreement with the IMF will take place. Meeting this objective is crucial to maintaining disbursements and sustaining the economic program, which has already demonstrated progress in lowering inflation and reducing the deficit.

The consulting firm Eseade warns that postponing foreign currency purchases during the peak harvest season could complicate the medium-term outlook. "Then, the harvest will slow, and accumulating reserves will become more challenging," they noted. Equilibra also noted that the government will have to find a balance between avoiding exchange rate pressure and not missing its target with the Fund.

On the international scene, the market rally was also driven by the announcement of a trade agreement between the United States and the United Kingdom that cuts tariffs on steel and aluminum. Donald Trump , leading the announcement, urged investors to "take advantage" and buy stocks. As an immediate effect, the major US indices traded higher: the S&P 550 rose 0.58% and Brent rose above $63, boosting energy stocks.

This environment favored local bonds and stocks, which could close out another positive session today. However, the path to complete stability is still far off, and the government knows it will need to maintain confidence to continue reducing country risk and return to international markets.